A pivotal battle is being waged in Ottawa concerning the disposition of the burgeoning EI surplus.

Paul Martin is doing his best Napoleon imitation as he fights criticism from all sides of the political spectrum over his plans to raid the EI fund to the tune of at least $7 billion. Opposition to this plan within Parliament and from a chorus of business, labour, and taxpayer groups is dutifully playing the role of General Wellington in this battle.

To recap, workers pay $2.70 in EI taxes for every $100 pre-tax dollars that they earn to a maximum of $1,053 per year. Employers, on the other hand, get whacked for $3.78 (1.4 times employee levels) for every $100 of payroll to a maximum of $1,474 per year for each
employee.

Workers and employers now pay $19 billion per year to the EI fund. Only $12 billion goes out in annual benefits which includes EI cheques, training related activities and other benefits such as maternity, sickness, parental and adoption benefits.

But this debate is an exercise in accounting fiction. EI premiums paid by workers and employers flow into the consolidated general revenue fund of the government. If you were to ask Paul Martin to produce the $20 billion four-year accumulated surplus tomorrow; the cupboard would be bare.

But what is real is that Paul Martin has designs on this year's surplus of $6 billion. The EI fund, on paper, needs to run an ongoing surplus of $10-$15 billion according to Finance and Human Resources departmental officials as they interpret Section 66 of the Employment Insurance Act which stipulates that "a) ensure that there will be enough revenue over a business cycle to pay the amounts authorized to be charged to the EI account, and b) maintain relatively stable rate levels throughout the business cycle."

Each fall, the Employment Insurance Commission recommends premium levels to the Finance Minister for the next calendar year. A leaked memo from the Chief Actuary of the EI fund, Michel Bedard, reveals that premiums could have been as low as $1.81 for employees last year to run the fund on a break-even basis and $2.10 to ensure that a healthy surplus was maintained. Furthermore, Mr. Bedard will probably recommend premiums in the neighbourhood of $2.00 for employees for the 1999 calendar year.

But Paul Martin would rather change the law so he doesn't have to take Mr. Bedard's advice. Martin has made the cold political calculation the EI cuts don't sell politically so it would be better to steal the money, yes steal it, and use it to fund healthcare or debt reduction or broad-based tax relief. Admittedly, all these choices are noble public policy goals but EI funds are given in trust by workers and employers for one purpose only, EI benefits. They are not to be used as a personal slush fund by the Finance Minister or his colleagues.

Lowering premiums is the law and sound public policy to boot. In a letter to Paul Martin, Ontario Finance Minister Ernie Eves states that lowering employee premium levels to $2.20 would create 200,000 new jobs. A Canadian Chamber of Commerce study also echoes this prediction. And a CFIB survey of 19,000 small businesses found that at least half would hire more if payroll taxes were reduced.

Paul Martin says we should debate this issue and talk about the choices in front of Canadians. The only choice for Paul Martin is to obey the EI law, not change it.

He should immediately abandon the idea to steal $6 billion from Canadian workers and employers. If he does not, then Napoleon has indeed come to Waterloo. And Mr. Martin can certainly kiss his napoleonic ambitions to be Emperor of Canada, a bittersweet goodbye.